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23 February, 20:46

Yvonne and Larry plan to begin a business that will grow plants for sale to retail nurseries. They expect to have substantial losses for the first three years of operations while they develop their plants and their sales operations. Both Yvonne and Larry have substantial interest income, and both expect to work full-time in this new business. List three advantages for operating this business as a partnership instead of a C corporation.

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  1. 24 February, 00:03
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    Partnership refers to a mutual agreement between two or more individuals to carry on a business and share it's profits and losses in a specified ratio as per the clauses in the partnership deed.

    A corporation form of business refers to a business characterized by separate legal existence, perpetual existence and common ownership.

    Following are the benefits of conducting business via mode of partnership instead of a corporation:

    Better freedom and independence in decision making process: Unlike in a corporation, the partners can mutually decide and arrive at a business decision quickly since under a corporation, a business decision requires approval of majority of the members and has to be put at vote. Collective vs Individual taxation. Partnership profits are taxable in the hands of the partners as individual share of profits each partner earns unlike a corporation wherein the corporate body is taxed first and then it's owners and shareholders personally for the income they earn. Partnership losses can be claimed by individuals against their personal income unlike corporate losses which are allowable to a corporation as a whole. Partners can share profits as per their mutually agreed upon profit sharing ratio unlike in case of corporates which take into consideration proportionate capital interests.
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